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Worried about the IAG share price? Here’s your dividend alternative…

Today, Insurance Australia Group (ASX: IAG) shareholders awoke to the news their dividend share would not pay a final fully franked dividend, for a myriad of reasons.

Rask Media’s Jaz Harrison covered IAG’s 2020 financial year update this morning, in this great article:

FY20 preview: IAG (ASX:IAG) cancels dividend

In short, you need to know two things:

  1. IAG typically pays between 60% and 80% of its yearly profit back to shareholders as fully franked dividends.
  2. IAG paid shareholders a half-year dividend of 10 cents per share earlier this year. With around 2.31 billion shares on issue, that means dividends worth around $231 million had already been paid.

Now, following a bunch of unusual and pretty hefty costs, the company expects to report a cash profit of around $279 million. So given it’s already paid the half-year dividend, IAG elected not to pay a final dividend.

IAG has followed ANZ Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) in letting down their faithful dividend-focused shareholders.

Your IAG share dividend alternative

In this low-interest rate environment, dividend income is more tempting than I’ve ever known.

However, now more than ever income-seeking investors should not be focused on the usual suspects — that is, the most popular dividend shares of yesterday. Complacency with investment research is being punished in 2020.

I think IAG investors have three choices:

  1. Keep holding yesterday’s blue-chip dividend payers (not my preferred strategy)
  2. Be prepared to sacrifice some short-term income and buy high-quality growth stocks that are resilient to COVID or actually growing faster than ever… there are quite a few of these on the ASX…
  3. Use low-cost and diversified ETFs for income. These can be bought or sold like a normal share but they, typically, invest in a full basket of different shares. This reduces the risk of holding just one asset (e.g. IAG shares) and relying solely on it to produce a tax-effective income stream from one year to the next.

Our premium Rask ETF service identifies our 9 best ETF ideas on the ASX. But if I was starting out on my ETF journey, I’d first take advantage of these free resources:

  1. Use the full list of ETFs to put your favourite ETFs on your watchlist
  2. Read this recent article: WTF is an ETF
  3. Take our free ETF course – it’s hugely popular for a reason
  4. Start with something simple, such as the Vanguard Australian Shares ETF (ASX: VAS) or the BetaShares Australia 200 ETF (ASX: A200)

Are you stuck wondering where to invest right now? Have you got cash 'sitting on the sidelines'? Are you looking for dividend income AND growth but don't know where to start? Rask's expert ASX analyst team has just released a full report, detailing where we'd invest $10,000 right now.

Not only are we offering these 11 investment ideas completely FREE, we've also released an in-depth podcast to go with the report!

So, whether you have $2,000 or $50,000, our brand new analyst report could help transform your watchlist. Right now, you can get the full analyst report emailed to you for FREE by CLICKING HERE NOW or simply entering your email below.

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Are you stuck wondering where to invest right now? Have you got cash 'sitting on the sidelines'? Are you looking for dividend income AND growth but don't know where to start? Rask's expert ASX analyst team has just released a full report, detailing where we'd invest $10,000 right now.

Not only are we offering these 11 investment ideas completely FREE, we've also released an in-depth podcast to go with the report!

So, whether you have $2,000 or $50,000, our brand new analyst report could help transform your watchlist. Right now, you can get the full analyst report emailed to you for FREE by CLICKING HERE NOW.

At the time of publishing, Owen owns units of the BetaShares Australia A200 ETF.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

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